By Glenn Fleishman
Updated: June 12, 2018 5:59 PM ET

Amazon’s threat to stall its growth in Seattle over a new business tax that would fund homeless shelters and low-income housing paid off today when the nine-member city council that passed the measure unanimously just four weeks ago voted 7-2 to repeal it after a contentious public hearing. Mayor Jenny Durkan has promised to sign the repeal, a strong retreat in the face of an e-commerce behemoth by an official elected in November who promised to balance community and business interests.

Amazon opposed the tax, originally floated at $500 a year for each of its Seattle employees. To signal its displeasure, the company halted construction on a new tower, and suggested it might sublet 722,000 square feet it had just leased in a signature downtown building. When the council approved a reduced $275 tax, Amazon restarted construction on the tower. But it also joined Starbucks and other local employers to fund a group, No Tax on Jobs, that raised over $300,000 to pay for signature gatherers for a referendum to repeal the head tax. In a statement after the vote, Amazon vice president Drew Herdener said, “Today’s vote by the Seattle City Council to repeal the tax on job creation is the right decision for the region’s economic prosperity.”

Seattle Council President Bruce Harrell said he introduced the repeal to avoid months of turmoil that would distract from the city budget and addressing the needs of the homeless comprehensively in the region. The measure was a surprise all around, to both businesses and groups supporting the tax, and the vote called under a special-meeting provision that required just 24-hours notice.

The law as passed would have brought in $275 per employee at businesses grossing at least $20 million in Seattle, and would have cost Amazon about $12.5 million in 2019. The company made $1.6 billion in profit in the first quarter of 2018, but in a leak to the local newspaper during the head-tax debate, the firm said it already pays about $250 million in local and state taxes, including business taxes and sales tax for its own purchases, exclusive of any sales tax it collects for Washington on goods and services Amazon sells its customers.

Local real-estate watchers estimate Amazon pays $200 million a year in office rent. The firm owns and leases over 10 million square feet in Seattle alone, where it employs over 45,000 workers.

Amazon also contributes heavily in cash and goods to Farestart, which delivers free meals and trains people in difficulty for restaurant jobs, and Mary’s Place, a non-profit that provides transitional housing to several hundred people, primarily women and their families. In May 2017, the company committed to building and permanently donating 47,000 square feet to Mary’s Space in a building near the one it froze and then resumed construction on. In its statement after the vote, the company also highlighted these two charities.

Though the head tax was clearly aimed at Amazon, the city’s largest employer and office tenant by far, it would have also swept in the employees of grocery stores and the daily Seattle Times to raise about $47 million in 2019 for homeless programs. Seattle and its region, King County, declared a state of emergency over homelessness in 2015.

Amazon had already rattled Seattle leaders in 2017 by announcing its search for a second headquarters, known as HQ2, in another city, where it would hire up to 50,000 additional employees over several years. However, many analysts say Amazon cannot hire enough workers in Seattle nor relocate enough here to meet its needs due to high demand for technical workers in the Bay Area and from other local employers, like Microsoft and Boeing, as well as growing outposts of Facebook, Google, and Apple.

Seattle housing costs have skyrocketed, though remain lower than the San Francisco Bay Area and some other metro regions. HQ2 has been viewed by some as a way to extract incentives from other communities while also creating a new employee pool. Amazon was founded in Seattle, and has received little local largesse of the kind companies bringing large projects or numbers of jobs negotiate for.

Washington has one of the most regressive tax structures in the country, and Seattle is the most regressive in the state. The state lacks an income tax, and an effort by Microsoft founder Bill Gates father—retired attorney, Bill Gates, Sr.—to tax high earners failed in 2010, blocked in part by a group funded by then-Microsoft CEO Steve Ballmer and Amazon’s CEO Jeff Bezos. A similar effort in Seattle was blocked by a judge in 2017. City and state business and occupation taxes apply to gross income, and contain loopholes and deductions for many industries. Sales tax tops 10% in Seattle, and King County’s property tax jumped over 15% from 2017 to 2018. Cities and the state have little option to pursue additional tax revenue needed for education, infrastructure, and health-care spending. The state legislature recently settled a long-running injunction by the state Supreme Court to fund education appropriately through property tax increases. Employee salaries and capital gains from stock options, grants, and company purchase programs are effectively untaxed in the state.

King County has the third-largest number of homeless people, estimated at nearly 12,000, the sixth worst per capita in U.S. metro regions. Seattle accounts for about three-quarters of that number. Roughly half have no shelter at any given time. In 2017, 169 people died on the streets of King County, a record mortality rate. The county and its cities collectively spent nearly $200 million in 2017 on programs related to homelessness, but a recent McKinsey & Company report says over $400 million is needed.

Update: This article was updated from the original with a response from Amazon.

SPONSORED FINANCIAL CONTENT

You May Like

EDIT POST